RIG 10-K & 10-Q changes, risk factors and insider trading

Our businessbusiness, and demand for our services, depends on oil and gas exploration, development and production in offshore areas where we are capable of operating. DemandOur for our services depends on these activities and relatedcustomers’ expenditure levels thatfor these activities are directly affected by trends in the price of oil and, to a lesser extent, natural gas. Oil and gas prices are extremely volatile and are affected by numerousmany factors, including the following:

The offshore drilling industry is highly cyclical and is impacted by oil and natural gas price levels and volatility. Periods of high customer demand, limited rig supply and high dayrates have been followed by periods of low customer demand, excess rig supply and low dayrates. Changes in commodity prices can have a dramatic effect on rig demand, and periods of excess rig supply may intensify competition in the industry and result in the idling of older and less technologically advanced equipment. We have idled and stacked rigs,rigs and may in the future idle or stack additional rigs or enter into lower dayrate drilling contracts in response to market conditions. Idled or stacked rigs may remain out of service for extended periods of time. During prior periods of high dayrates and rig utilization rates, we and other industry participants have responded to increasedactual or anticipated increases in customer demand by increasing the supply of rigs through ordering the construction of new units. The introduction of new units delivered without contracts, combined with an increased number of rigs in the global market completing contracts and becoming idle, may intensify price competition. During periods of low oil and natural gas price levels, new construction has resulted in an oversupply of rigs and has caused a subsequent decline in dayrates and rig utilization rates, sometimes for extended periods of time. In an oversupplied market, we may have limited bargaining power to negotiate on more favorable terms. Additionally, lower market dayrates and intense price competition may drive customers to seek to renegotiate existing contracts to reduce dayrates in exchange for longer contract terms. Lower dayrates and rig utilization rates could adversely affect our revenues and profitability.

As of February 12,19, 2025,2026, we have 10three uncontracted rigs, ofrigs which seven have been out of service for greater than five years, and these rigs may remain out of service for extended periods of time. If we are unable to obtain drilling contracts for our uncontracted rigs, whether due to a prolonged offshore drilling market downturn, a delayed or muted recovery of such market or otherwise, it may have an adverse effect on our results of operations and cash flows.

At February 12,19, 2025,2026, our contract backlog was $8.33$6.06 billion. This amount represents the maximum contractual operating dayrate multiplied by the number of days remaining in the firm contract period, including certain performance-based provisions for which achievement is probable, excluding revenuesprovisions for mobilization, demobilization, contract preparation, other incentive provisions or reimbursement revenues, which are not expected to be significant to our contract drilling revenues. The contractual operating dayrate may be higher than the actual dayrate we ultimately receive or an alternative contractual dayrate, such as waitingwaiting-on-weather onrate, weatherwaiting-on-customer rate, repair rate, standby rate or force majeure rate, may apply under certain circumstances. The contractual operating dayrate may also be higher than the actual dayrate we ultimately receive due to a number of factors, including rig downtime or suspension of operations. We may receive a lower contractual operating dayrate during periods when drilling operations are necessary to extend beyond an agreed schedule, even if we are not the cause of the delay in completing drilling operations. Several factors could cause rig downtime or a suspension of operations, including: equipment breakdowns and other unforeseen engineering problems, labor strikes and other work stoppages, shortages of material and skilled labor, surveys by government and maritime authorities, periodic classification surveys, severe weather or harsh operating conditions, and force majeure events.

We engage in offshore drilling services for most of the leading integrated energy companies or their affiliates, as well as for many government-owned or government-controlled energy companies and other independent energy companies. For the year ended December 31, 2024,2025, our most significant customers were Shell,Petróleo Brasileiro S.A. (together with its affiliates, “Petrobras”), Shell plc (together with its affiliates, “Shell”) and Equinor,Equinor ASA (together with its affiliates, “Equinor”), representing 2722 percent, 2122 percent and 1312 percent, respectively, of our consolidated operating revenues. As of February 12,19, 2025,2026, the customers with the most significant aggregate amount of contract backlog associated with our drilling contracts were PetrobrasPetrobras, Equinor, BP p.l.c., Shell, Chevron Corporation and Shell,Woodside Energy Group Ltd., representing 2420 percent, 16 percent, 16 percent, 12 percent, 11 percent and 1710 percent, respectively, of our total contract backlog. The loss of any of these customers or another significant customer, or a decline in payments under any of our drilling contracts, could, at least in the short term, have an adverse effect on our business.

The U.S. Gulf of Mexico,America, the South China Sea and the Northwest Coast of Australia are areas subject to typhoons, hurricanes or other extreme weather conditions on a relatively frequent basis, and our drilling rigs in these regions may be exposed to damage or total loss by these storms, some of which may not be covered by insurance. The occurrence of these events could result in the suspension of drilling operations, damage to or destruction of the equipment involved and injury to or death of rig personnel. Some experts believe global climate change could increase the frequency and severity of these extreme weather conditions. Operations may also be suspended because of machinery breakdowns, abnormal drilling conditions, failure of subcontractors to perform or supply goods or services, or personnel shortages. We customarily provide contract indemnity to our customers for certain claims that could be asserted by us relating to damage to or loss of our equipment, including rigs, and claims that could be asserted by us or our employees relating to personal injury or loss of life.

Damage to the environment or natural resources could also result from our operations, particularly through spillage of hydrocarbons, fuel, lubricants or other chemicals and substances used in drilling operations, or extensive uncontrolled fires. We may also be subject to property damage, environmental indemnityindemnity, well contamination and other claims by energy companies or other third parties. Drilling involves certain risks associated with the loss of control of a well, such as blowout, cratering, the cost to regain control of or redrill the well and remediation of associated pollution. Our customers may be unable or unwilling to indemnify us against such risks. In addition, a court may decide that certain indemnities in our current or future drilling contracts are not enforceable. The law generally considers contractual indemnity for criminal fines and penalties to be against public policy, and the enforceability of an indemnity as to other matters may be limited.

Our insurance policies and drilling contracts contain rights to indemnity that may not adequately cover our losses, and we do not have insurance coverage or rights to indemnity for all risks. For example, pollution and environmental risks generally are not completely insurable. We have two main types of insurance coverage: (1) hull and machinery coverage for physical damage to our property and equipment and (2) excess liability coverage, which generally covers offshore risks, such as personal injury, third-party property claims, and third-party non-crew claims, including wreck removal and pollution. We generally have no hull and machinery insurance coverage for damages caused by named storms in the U.S. Gulf of Mexico.America. We maintain per occurrence deductibles that generally range up to $10 million for various third-party liabilities, and we self-insure up to $75 million of the $750 million excess liability coverage through our wholly owned captive insurance company. We also retain the risk for any liability that exceeds our excess liability coverage. However, pollution and environmental risks generally are not completely insurable.

If a significant accident or other event occurs that is not fully covered by our insurance or by an enforceable or recoverable indemnity, the occurrence could adversely affect our financial position, results of operations or cash flows. The amount of our insurance may also be less than the related impact on enterprise value after a loss. Our insurance coverage will not in all situations provide sufficient funds to protect us from all liabilities that could result from our drilling operations. Our coverage includes annual aggregate policy limits.limits, As a result,and we generally retain the risk for any losses in excess of these limits. We generally do not carry insurance for loss of revenue, and certain other claims may also not be reimbursed by insurance carriers. Any such lack of reimbursement may cause us to incur substantial costs. In addition, we could decide to retain more risk in the future, resulting in higher risk of losses, which could be material. Moreover,Additionally, we may not be able to maintain adequate insurance in the future at rates that we consider reasonable or be able to obtain insurance against certain risks.risks, and we could decide to retain more risk in the future, resulting in higher risk of losses, which could be material.

During periods of depressed market conditions, we are subject to increased counterparty risk, as our customers may seek to repudiate their contracts, including through claims of non-performance in order to reduce their capital expenditures. Our customers may no longer need a drilling rig that is currently under contract or may be able to obtain a comparable drilling rig at a lower dayrate. We have experienced, and are at continued risk of experiencing, early contract terminations during periods of a weak commodity price environment. The ability of each of our counterparties to perform its obligations under a contract with us, including indemnity obligations, depends on a number of factors that are beyond our control and may include, among other things, conditions of the economy in general or of the offshore drilling industry in particular, prevailing prices for oil and natural gas, the overall financial condition of the counterparty, the dayrates received and the level of expenditures necessary to maintain drilling activities. Should a counterparty fail to honor its obligations under an agreement with us, we could sustain losses, which could have an adverse effect on our business and on our financial position, results of operations or cash flows.

We may pursue transactions that involve the acquisition or disposition of businesses or assets, mergers or joint ventures or other investments that we believe will enable us to further strengthen, streamline or broaden our business. Any such transaction would be evaluated on a case-by-case basis, and the consummation thereof would be dependent upon several factors, including identifying suitable companies, businesses or assets that align, or no longer align, with our business strategies, reaching agreement with the potential counterparties on acceptable terms, the receipt of any applicable regulatory and other approvals, counterparties fulfilling contractual obligations and other conditions. These transactions involve various risks, including among others, (i) difficulties related to integrating, separating or managing applicable parts of an acquired, or disposed of, business, assets or joint venture and unanticipated changes in customer and other third-party relationships subsequent to closing, (ii) diversion of management's attention from day-to-day operations, (iii) failure to realize anticipated benefits, such as cost savings, revenue enhancements or strengthening, streamlining or broadening our business, (iv) potentially substantial transaction costs associated with acquisitions, joint ventures or investments if we or a transaction counterparty seeks to exit or terminate an interest in the joint venture or investment, (v) applicable antitrust laws and other regulations that may limit our ability to acquire targets or require us to divest an acquired business or assets,asset, (vi) potential accounting impairment or actual diminution or loss of value of our investment if future market, business or other conditions ultimately differ from our assumptions at the time of such transaction is consummated and (vii) potential accounting impairment upon the decision to reclassify assets as held for sale.

Failure to effectively and timely address theIncreased transition to renewable or other alternative energy sources, or to respond to other climate related business trends,sources could adversely affect our business, results of operations and cash flows.

Our long-term success will be impacted in part by ourthe ability of global energy markets to effectively address the transition to renewable and other alternative energy sources, andsince ourincreased abilitytransition to respondsuch toalternative other climate-related business trends thatsources could adversely impact the long-term demand for oil and natural gas and, ultimately, the demand for our services and products from our services. AddressingAn increase in the demand for alternative energy sources, including as a result of new and more efficient technologies or increased focusgovernment onsubsidies and intervention, could further increase the developmentmarket share of additional alternative energy sources andas othercompared climate-relatedto business trends has requiredoil and willgas. furtherSuch requireshifts, adaptingif certainany, partsin the global energy markets could adversely affect our business, results of our operations to changing government requirements and customercash preferences.flows.

Our aspirations, goals, commitment targets and initiatives related to sustainability, including emissions reduction, and our public statements and disclosures regarding them, expose us to numerous risks.

We may periodically develop and set goals, targets, and other objectives related to sustainability matters, including with respect to emissions reduction. Statements related to these goals, targets and other objectives do not constitute a guarantee that they will be achieved. Our efforts to research, establish, accomplish, and accurately report on these goals, targets, and other objectives expose us to numerous operational, reputational, financial, legal, and other risks. Our ability to achieve any stated goal, target, or other objective, is subject to numerous factors and conditions, many of which are outside of our control. Our business may face increased scrutiny from investors, business partners and others related to our sustainability activities, including the goals, commitment targets, and other objectives that we announce, and our methodologies and timelines for pursuing them. If our sustainability assumptions or practices do not meet investor, regulatory or other relevant expectations and standards, which continue to evolve, our reputation, our ability to attract or retain employees,employees and our attractiveness as an investment or business partner could be negatively affected. Similarly, our failure or perceived failure to pursue or fulfill our sustainability-focused goals, targets, and objectives, to comply with ethical, environmental, or other standards, regulations, or expectations, or to satisfy various reporting standards with respect to these matters, within the timelines we announce, or at all, could adversely affect our business or reputation,reputation asand well ascould expose us to government enforcement actions and private litigation.

Worldwide financial, economic and political conditions could restrict our ability to access the capital markets, reduce our flexibility to react to changing economic and business conditions and reduce demand for our services.

Worldwide financial and economic conditions could restrict our ability to access the capital markets at a time when we would like, or need, to access such markets, which could have an impact on our flexibility to react to changing economic and business conditions. Worldwide economic conditions have in the past impacted, and could in the future impact, the lenders participating in our credit facilities and our customers, causing them to fail to meet their obligations to us. If economic conditions preclude or limit financing from banking institutions participating in our credit facilities, we may not be able to obtain similar financing from other institutions. A slowdown in economic activity could reduce worldwide demand for energy. These potential developments, or market perceptions concerning these and related issues, could adversely affect our financial position, results of operations or cash flows. In addition, turmoil and hostilities in the Middle East, Eastern Europe, North AfricaAfrica, South America and other geographic areas and countries present incremental risk. An extended period of negative outlook for the world economy could reduce the overall demand for oil and natural gas and for our services. A decline in oil and natural gas prices could reduce demand for our drilling services and have an adverse effect on our financial position, results of operations or cash flows.

Our business is affected by laws and regulations relating to the energy industry and the environment and safety, including international conventions and treaties, and regional, national, state, and local laws and regulations. Our business also depends on demand for services from the oil and gas exploration and production industry, and, accordingly, we are directly affected by the adoption of laws and regulations that, for economic, environmental or other policy reasons, curtail, delay or impose additional compliance costs and obligations related to the exploration and development drilling for oil and gas. Offshore drilling in certain areas has been curtailed and, in certain cases, prohibited because of environmental or safety concerns. In addition, compliance with environmental and safety laws, regulations and standards, where applicable, may require us to make significant capital expenditures, such as the installation of costly equipment or implementation of operational changes, and may affect the resale values or useful lives of our rigs. We may incur additional costs in order to comply with other existing and future regulatory obligations or industry standards, including, but not limited to, costs relating to air emissions, including greenhouse gases, the management of ballast waters, hull cleaning, maintenance and inspection, development and implementation of emergency procedures and maintenance of insurance coverage or other financial assurance of our ability to address pollution incidents. In the last decade, U.S. federal agencies adopted enhanced governmental safety and environmental requirements applicable to our operations for drilling in the U.S. Gulf of Mexico.America. These requirements have caused increased compliance costs and may in the future increase the risk of environmental or safety enforcement cases and litigation and cause operators to have difficulties obtaining drilling permits in the U.S. Gulf of Mexico.America. The U.S. Bureau of Ocean Energy Management (the “BOEM”) implemented changes regarding when oil, gas and sulfur lessees and certain other parties operating in the offshore Outer Continental Shelf (“OCS”) must post additional bonds or other supplemental financial assurance, which could increase bonding requirements and operating expenditures for some of our customers, and as a result, increase price competition for our services.

As a contract driller with operations in certain offshore areas, we may be liable for damages and costs incurred in connection with oil spills or disposal of wastes related to those operations, and we may also be subject to significant fines and other liabilities in connection with spills. For example, an oil spill could result in significant liability, including fines, penalties and criminal liability and remediation, restoration or compensation costs for environmental or natural resource damages, as well as third-party damages, to the extent that the contractual indemnification provisions in our drilling contracts are not enforceable or otherwise sufficient, or if our customers are unwilling or unable to contractually indemnify us against these risks. Additionally, we may not be able to obtain such indemnities in our future drilling contracts, and our customers may not have the financial capability to fulfill their contractual obligations to us. Also, these indemnities may be held to be unenforceable in certain jurisdictions, as a resultbecause of public policy or for other reasons. See “—Our business involves numerous operating hazards, and our insurance and indemnities from our customers may not be adequate to cover potential losses from our operations.”

Scientific studies have suggested that emissions of certain gases, including greenhouse gases, such as carbon dioxide and methane, contribute to warming of the earth’s atmosphere and other climatic changes. In response to such studies, the issue of climate change and the effect of greenhouse gas emissions, in particular emissions from the fossil fuel industry, has attracted and continues to attract considerable political and social attention worldwide. The attention to climate change has led, and we expect it to continue to lead, to additional regulations designed to reduce greenhouse gas emissions domestically and internationally.other Inemissions Augustin 2022,various forjurisdictions example, the U.S. enacted the Inflation Reduction Act of 2022,in which madewe available hundreds of billions of dollars in incentives for the development of renewable energy, clean hydrogen, clean fuels, electric vehicles and supporting infrastructure and carbon capture and sequestration, amongst other provisions. Additionally, at the United Nations Climate Change Conference in the United Arab Emirates in December 2023, more than 190 governments reached a non-binding agreement to transition away from fossil fuels and encourage the growth and expansion of renewable energy.operate. Such attention could also result in other adverse impacts for the oil and gas industry, including further restrictions or bans imposed by lawmakers, lawsuits by governments or third-parties seeking recoveries for damages resulting from the combustion of fuels that may contribute to climate change effects, decreased demand for goods and services that produce significant greenhouse gas emissions, or reduced interest from investors if they elect in the future to shift some or all of their investments to non-fossil fuel related sectors. To the extent financial markets view climate change and greenhouse emissions as a financial risk, this could negatively impact our cost of or access to capital. Because our business depends on the level of activity in the oil and gas industry, existing or future laws, regulations, treaties or international agreements related to greenhouse gases and climate change, or related political, litigation or financial risks, including incentives to conserve energy or use alternative energy sources, could have a negative impact on our business if such laws, regulations, treaties or international agreements reduce the worldwide demand for oil and gas or limit drilling opportunities. In addition, such laws, regulations, treaties or international agreements or related risks could result in increased compliance costs or additional operating restrictions, which may have an adverse effect on our business. Further, some experts believe global climate change could increase the frequency and severity of extreme weather conditions, the impacts of which could interfere with our operations, cause damage to our equipment as well as cause other financial and operational impacts, including those that could result from any impact of such conditions on our customers.

We could also face increased climate-related litigation with respect to our operations both in the U.S. and around the world. Governmental and other entities in various U.S. states, such as California and New York, have filed lawsuits against coal, gasgas, oil and petroleum companies. These suits allege damages as a result of climate change, and the plaintiffs are seeking unspecified damages and abatement under various tort theories. Similar lawsuits may be filed in other jurisdictions both in the U.S. and globally. Though we are not currently a party to any such lawsuit, these suits present a high degree of uncertainty regarding the extent to which energy companies, including offshore drillers, face an increased risk of liability stemming from climate change, which risk would also adversely impact the oil and gas industry and impact demand for our services.

Any restrictions on oil and natural gas operations on the U.S. Outer Continental Shelf (“OCS”) could have an adverse impact on our business and demand for our services.

The U.S. Department of the Interior (“DOI”) administers the submerged lands, subsoil, and seabed, lying between the seaward extent of the states’ jurisdiction and the seaward extent of federal jurisdiction, and the U.S. government has the power to limit oil and gas activities on this area, known as the OCS. Under the Outer Continental Shelf Lands Act, as amended,amended (the “OCSLA”), the BOEM within the DOI must prepare and maintain forward-looking five-year plans – referred to as national programs or five-year programs – to schedule proposed oil and gas lease sales on the OCS. The number of lease sales and areas available for lease provided in a five-year program may differ from program to program. To the extent that the number of lease sales and areas available for lease withwithin the current five-year program –program, or in any future five-year program –program, are not sufficient to meet our customers’ planned or expected offshore drilling programs, demand for our drilling services on the OCS may be impacted. In addition, executive,Executive, legislative and judicial actions in the U.S. from time to time have restricted certain oil and gas activities on the OCS. For example, litigation is ongoing in U.S. federal courts regarding the potential reversal of a previously ordered withdrawal of acreage from future oil and gas leasing under the OCSLA. Future actions taken by the U.S. to limit the availability of new oil and gas leases on the OSC would adversely impact the offshore oil and gas industry and impact demand for our services.

Governments in some countries have become increasingly active in regulating and controlling the ownership of concessions and companies holding concessions, the exploration for oil and gas and other aspects of the oil and gas industries in their countries, including local content requirements for participating in tenders for certain drilling contracts. Many governments currently favor or effectively require –effectively, or based upon changes to laws, regulations or interpretations thereof, may in the future favor or effectively require –require, the awarding of drilling contracts to local contractors or require nonlocal contractors to employ citizens of, or purchase supplies from, a particular jurisdiction or require use of a local agent. We cannot predict whether any changes to laws, regulations or interpretations thereof would result in modifications to our operations nor whether any such modifications would have a material impact to our business. In addition, government action, including initiatives by OPEC, may continue to cause oil or gas price volatility. In some areas of the world, this governmental activity has adversely affected the amount of exploration and development work by major energy companies and may continue to do so.

Our ability to operate worldwide depends on our ability to obtain the necessary visas and work permits for our personnel to travel in and out of, and to work in, the jurisdictions in which we operate. Governmental actions in some of the jurisdictions in which we operate may make it difficult for us to move our personnel in and out of these jurisdictions by delaying or withholding the approval of these permits. If we are not ableunable to obtain visas and work permits for the employees we need to conduct our operations on a timely basis, we might not be able to perform our obligations under our drilling contracts, which could allow our customers to cancel the contracts. If our customers cancel some of our drilling contracts, and we are unable to secure new drilling contracts on a timely basis and on substantially similar terms, it could have a material adverse effect on our business and on our financial position, results of operations or cash flows.

We are subject to a variety of disputes, investigations and litigation. Certain of our subsidiaries are subject to and have been involved in litigation with certain of our customers and other constituents. Certain of our subsidiaries are named as defendants in numerous lawsuits alleging personal grievances or injury, including as a result of exposure to asbestos or toxic fumes or resulting from other occupational diseases, such as silicosis, and various other medical issues that can remain undiscovered for a considerable amount of time. Some of these subsidiaries that have been put on notice of potential liabilities have no assets. Certain subsidiaries are subject to litigation relating to environmental damage. Our patent for dual-activity technology has been successfully challenged in certain jurisdictions. We are also subject to a number of significant tax disputes. We cannot predict the outcome of these investigations and cases or the potential costs to resolve them. Insurance may not be applicable or sufficient in all cases,cases and insurers may not remain solvent and policies may not be located. Suits against non-asset-owning subsidiaries have given and may in the future give rise to alter ego or successor-in-interest claims against us and our asset-owning subsidiaries to the extent a subsidiary is unable to pay a claim or insurance is not available or sufficient to cover the claims. To the extent that one or more pending or future investigations or litigation matters is not resolved in our favor and is not covered by insurance, whichsuch matter or matters could have a material adverse effect on our financial position, results of operations or cash flows.

We are subject to cybersecurity risks and threats as well as increasingrisks related to the use of artificial intelligence and the regulation of data privacy and security.

Acts of terrorism, piracy and political and social unrest could affect the marketsmarket for drilling services.

Acts of terrorism and social unrest, brought about by world political events or otherwise, have caused instability in the world’s financial and insurance markets in the past and may occur in the future. Such acts could be directed against companies such as ours. In addition, acts of terrorism, piracy and social unrest could lead to increased volatility in prices for crude oil and natural gas and could affect the marketsmarket for drilling services. Insurance premiums could increase and coverage may be unavailable in the future. Government regulations may effectively preclude us from engaging in business activities in certain countries. These regulations could be amended to cover countries where we currently operate or where we may wish to operate in the future. Our drilling contracts do not generally provide indemnification against loss of capital assets or loss of revenues resulting from acts of terrorism, piracy or political or social unrest. We have limited insurance for our assets providing coverage for physical damage losses resulting from certain risks, such as terrorist acts, piracy, vandalism, sabotage, civil unrest, expropriation and acts of war, and we do not carry insurance for loss of revenues resulting from such risks.

Transocean Ltd. (together with its subsidiaries and predecessors, unless the context requires otherwise, “Transocean,” “we,” “us” or “our”) is a leading international provider of offshore contract drilling services for oil and gas wells. As of February 11,17, 2025,2026, we owned or had partial ownership interests in and operated 3427 mobile offshore drilling units, consisting of 2620 ultra-deepwater floatersdrillships and eightseven harsh environment floaters.semisubmersibles.

InHeld-for-sale Julyasset 2024, we completed the sale of the ultra-deepwater floater Deepwater Nautilus and related assets for aggregate net cash proceeds of $53 million. impairments—In the year ended December 31, 2024,2025, we recognized aan aggregate loss of $143$3.05 millionbillion ($138$3.04 millionbillion, or $0.15$3.16 per diluted share, net of tax), associated with the impairment of thesix rigultra-deepwater floaters and one harsh environment floater, together with related assets, which we determined were impaired at the time that we classified the assets as held for sale.sale, and two ultra-deepwater floaters, together with related assets, which we previously classified as held for sale and determined the assets were further impaired. See “—Operating Results,Results.” “—Liquidity and Capital Resources—Sources and uses of liquidity.”

DebtShare issuance—In AprilSeptember 2024,2025, we issued $900143.8 million aggregateTransocean principalLtd. amount of 8.25% senior notes due May 2029 (the “8.25% Senior Notes”)shares and $900received $421 million aggregate principal amount of 8.50% senior notes due May 2031 (the “8.50% Senior Notes”), and we received $1.77 billion aggregate cash proceeds, net of issue costs. See “—Liquidity and Capital Resources—Sources and uses of liquidity.”

Debt tender offersissuance—In AprilOctober 2024,2025, we madeissued an aggregate cash payment of $886 million, including related costs, to complete tender offers (the “Tender Offers”) for $596 million and $249$500 million aggregate principal amount of the validly tendered 11.50%7.875% senior guaranteed notes due JanuaryOctober 20272032 (the “11.50%7.875% Senior Guaranteed Notes”) and 7.25%received senior$492 notesmillion dueaggregate Novembercash 2025proceeds, (thenet “7.25%of Seniorissue Notes”), respectively.costs. See “—Liquidity and Capital Resources—Sources and uses of liquidity.”

Debt redemption—In AprilOctober 2024,2025, we made an aggregate cash payment of $658$903 million, including related costs, to fully redeem $569 million aggregate principal amount of 7.50% senior notes due January 2026 and partially redeem $87$655 million aggregate principal amount of 8.00% Seniorsenior Notes.notes Indue theFebruary year2027 endedand December 31, 2024, we made an aggregate cash payment of $204 million to redeem the remaining $105$248 million aggregate principal amount of 7.25%6.875% Seniorsenior Notessecured andnotes $91due millionFebruary aggregate principal amount of 11.50% Senior Guaranteed Notes outstanding following the completion of the Tender Offers.2027. See “—Liquidity and Capital Resources—Sources and uses of liquidity.”

Contract backlog—We believe our industry leading contract backlog distinguishes us from the competition and provides indicatorsan indicator of our future revenue-earning opportunities. Contract backlog is defined as the maximum contractual operating dayrate multiplied by the number of days remaining in the firm contract period, including certain performance-based provisions for which achievement is probable, excluding revenuesprovisions for mobilization, demobilization, contract preparation, other incentive provisions or reimbursement revenues, which are not expected to be material to our contract drilling revenues. The contract backlog represents the maximum contract drilling revenues that can be earned considering the contractualreported operating dayrate in effect during the firm contract period. The contract backlog for our fleet was as follows:

The average contractual dayrate relative to our contract backlog is defined as the average maximum contractual operating dayrate to be earned per operating day and certain performance-based provisions expected to be achieved in the measurement period. An operating day is defined as a day for which a rig is contracted to earn a dayrate during the firm contract period after operations commence. At February 12,19, 2025,2026, the contract backlog and average contractual dayrates for our fleet were as follows:

The contractual operating dayrate may be higher than the actual dayrate we ultimately receive because an alternative contractual dayrate, such as a waiting-on-weather rate, waiting-on-customer rate, repair rate, standby rate or force majeure rate, may apply under certain circumstances. The contractual operating dayrate may also be higher than the actual dayrate we ultimately receive because of a number of factors, including rig downtime or suspension of operations. In certain contracts, the actual dayrate may be reduced to zero if, for example, repairs extend beyond a stated period of time. See “Part I. Item 1A. Risk Factors—Risks related to our business—Our current backlog of contract drilling revenues may not be fully realized.”

Our revenue efficiency rate varies due to revenues earned under alternative contractual dayrates, such as a waiting-on-weather rate, waiting-on-customer rate, repair rate, standby rate, force majeure rate or zero rate, that may apply under certain circumstances. Our revenue efficiency rate is also affected by incentive performance bonuses or penalties. We include newbuilds in the calculation when the rigs commence operations upon acceptance by the customer. We exclude rigs that are not operating under contract, such as those that are stacked.

Contract drilling revenues—Contract drilling revenues increased for the year ended December 31, 2024,2025, compared to the year ended December 31, 2023,2024, primarily due to the following: (a) approximately $470$140 million resulting from higher average daily revenues, (b) approximately $110 million resulting from increased utilization, (bc) approximately $275$80 million resulting from improvedincreased averagerevenue dailyefficiency revenues, (c) approximately $140 million resulting fromfor the operations of our newbuild ultra-deepwater floaters Deepwater Titan and Deepwater Aquila,fleet, (d) approximately $70 million resulting from increased activity for the operations of Transoceanour Norgenewbuild ultra-deepwater drillship Deepwater Aquila and (e) $48approximately $50 million resulting from decreasedincreased amortizationreimbursement of contract intangible assets.revenues. These increases were partially offset by the following: (a) approximately $200$10 million resulting from rigsone soldless orcalendar classified as held for sale, (b) approximately $50 million resulting from decreased revenue efficiency for the comparable active fleet and (c) approximately $35 million resulting from early termination feesday in the year ended December 31, 2023 with no comparable activity in the current-year period and (d) approximately $20 million resulting from unfavorable currency exchange rates.2025.

Costs and expenses—Operating and maintenance costs and expenses increased for the year ended December 31, 2024,2025, compared to the year ended December 31, 2023,2024, primarily due to the following: (a) approximately $310$85 million resulting from increased operatingactivity activity,for the operations of our active fleet, (b) approximately $70$50 million resulting from increased reimbursable costs, (c) a net increased loss of approximately $45 million associated with certain legal outcomes that resulted in a net non-cash loss of $20 million in the current year compared to a net gain of $25 million from favorable settlements in the earlier year, (d) approximately $35 million resulting from the operations of our newbuild Deepwater TitanAquila and Deepwater Aquila, (ce) approximately $65 million resulting from incremental in-service costs related to additional subcontracted services, (d) approximately $60$35 million resulting from the estimated effect of inflation on personnel and other operating costs, (e) approximately $30 million resulting from the operations of Transocean Norge, and (f) approximately $15 million resulting from increased out-of-service costs. These increases were partially offset by the following: (a) approximately $180$25 million resulting from rigs sold or classified as held for sale,sale or sold, (b) approximately $100$15 million resulting from lower supply chain costs incurred during contract preparation,and (c) approximately $25$5 million resulting from increasedcosts favorableassociated settlementswith the early retirement of variouscertain litigationpersonnel andin contingenciesthe andearlier (d) approximately $20 million resulting from favorable currency exchange rates.year.

Depreciation and amortization expense decreased for the year ended December 31, 2024,2025, compared to the year ended December 31, 2023,2024, primarily due to the following: (a) $33$97 million resulting from rigs sold, contributedsold or classified as held for sale and (b) $12$9 million resulting from assets that were retired or had reached the end of their useful lives or had been retired,lives, partially offset by an increase of (c) $40$27 million resulting from three newbuild ultra-deepwater floaters, one acquired harsh environment floatersemisubmersible, one newbuild ultra-deepwater drillship and other property and equipment placed into service.service in the earlier year.

General and administrative costs and expenses increaseddecreased for the year ended December 31, 2024,2025, compared to the year ended December 31, 2023,2024, primarily due to the following: (a) $17$8 million resulting from increaseddecreased legal and professional fees, (b) $5 million resulting from decreased personnel costs, primarily resulting from costs associated with the early retirement of certain personnel,personnel in the earlier year, and (bc) $13approximately $4 million resulting from increaseddecreased legaltechnology and professional fees.costs.

Disposal of assets—In the year ended December 31, 2023,2025, we recognized a lossnet gain of $169$4 million associated with ourthe non-cash contributiondisposal of ultra-deepwater floater Ocean Rig Olympiarigs and related assets in exchange for an equity ownership interest in Global Sea Mineral Resources NV.assets. In the years ended December 31, 20242025 and 2023,2024, we recognized ana aggregatenet gain of $3 million and a net loss of $16 million and $14 million, respectively, associated with the disposal of assets unrelated to rig sales.

Other income and expense—Interest expense,expense net of amounts capitalized, decreasedincreased in the year ended December 31, 2024,2025, compared to the year ended December 31, 2023,2024, primarily due to the following: (a) $342$204 million decreasedincreased interest resulting from a decreased gain on the fair value adjustment of the bifurcated compound exchange feature embedded in the indenture governing the 4.625% senior guaranteed exchangeable bonds due September 2029 (the “4.625% Senior Guaranteed Exchangeable Bonds”) and, (b) $75$55 million increased interest resulting from debt issued in the earlier year and (c) $15 million increased interest resulting from interest costs capitalized for our newbuild construction program completed in the earlier year, partially offset by (d) $79 million decreased interest resulting from debt repaid as scheduled or early retired, partially offset by, (c) $133 million increased interest resulting from debt issued and (d) $24 million increased interest resulting from reduced interest costs capitalized for our recently completed newbuild construction program.retired.

In the year ended December 31, 2025, we recognized a net gain on retirement of debt due to the following: (a) a net gain of $4 million associated with the retirement of $105 million aggregate principal amount of notes validly tendered in the tender offers completed in the year, partially offset by (b) a net loss of $1 million associated with the redemption of $940 million aggregate principal amount of our debt securities. In the year ended December 31, 2024, we recognized a net gain on retirement of debt asdue followsto the following: (a) a net gain of $144 million resultingassociated fromwith the retirement of $845 million aggregate principal amount of notes validly tendered in the Tendertender Offersoffers completed in the year and (b) a net gain of $17 million resultingassociated fromwith the redemption of $852 million aggregate principal amount of our debt securities. In the year ended December 31, 2023, we recognized a net loss primarily resulting from the redemption of $1.38 billion aggregate principal amount of our debt securities.

Other incomeexpense net, increased in the year ended December 31, 2024,2025, compared to the year ended December 31, 2023,2024, primarily due to the following: (a) a loss of $27$99 million associated withwith, apursuant paymentto ofthe cashExchange orAgreements, the issuance of additional Transocean Ltd. shares to certain holders that elected to exercise their exchanges rights for theof 4.00% Senior Guaranteed Exchangeable Bonds and the 4.625% Senior Guaranteed Exchangeable Bonds in the year ended December 31, 2023 with no comparable activity in the current year, (b) decreaseda lossesnet increased loss of $19$29 million relatedassociated towith ourcurrency equityexchange investmentsrate in unconsolidated affiliateschanges and (c) an increased gain of $6 million related to net changes to currency exchange rates, partially offset by (d) decreased income of $19$22 million relatedassociated towith ournon-service dual-activitycomponents patent.of net periodic benefit income.

Income tax expense—In the years ended December 31, 20242025 and 2023,2024, our effective tax rate was 2.21.1 percent and (1.4)2.2 percent, respectively, based on loss before income tax expense or benefit. In the years ended December 31, 20242025 and 2023,2024, the aggregate effect of various discrete period tax items was a net tax benefit of $158$193 million and $74$158 million, respectively. In the year ended December 31, 2025, such discrete items included changes to various uncertain tax positions, valuation allowances, rig ownership changes and rig basis changes related to impairments. In the year ended December 31, 2024, such discrete items included changes to deferred taxes resulting from operational and structural changes related to rig movements and asset impairments, changes to valuation allowances and settlements and expirations of various uncertain tax positions. In the year ended December 31, 2023, such discrete items included settlements and expirations of various uncertain tax positions, changes to valuation allowances and changes to deferred taxes due to new rig operations. In the years ended December 31, 20242025 and 2023,2024, our effective tax rate, excluding discrete items, was 159.181.2 percent and (13.3)159.1 percent, respectively, based on income or loss before income tax expense or benefit.expense. In the year ended December 31, 20242025 compared to the year ended December 31, 2023,2024, our effective tax rate excluding discrete items increased primarily due to changes in the relative blend of income from operations in certain jurisdictions.

Due to our operating activities and organizational structure, our income tax expense or benefit does not change proportionally with our income or loss before income taxes. We may have subsidiaries with tax expense on taxable earnings that exceeds the tax benefits in other jurisdictions, or vice versa, which sometimes results in a negative effective tax rate or unusually large effective tax rates relative to consolidated income or loss before income taxes.tax expense or benefit. Our rig operating structures further complicate our tax calculations, especially in instances where we have more than one operating structure for the taxing jurisdiction and, thus, more than one method of calculating taxes depending on the operating structure utilized by the rig under the contract.

In the year ended December 31, 2024,2025, our primary sources of cash were net cash proceeds from issuance of debt, net cash provided by our operating activitiesactivities, net cash proceeds from the issuance of shares and net cash proceeds from disposalthe issuance of assets.debt. Our primary uses of cash were debt repayments and capital expenditures.

Net cash provided by operating activities increased primarily due to (a) increased cash collectedreceived from customers,customers and (b) decreased cash paid to suppliers, partially offset by increased cash paid to suppliers and(c) increased cash paid for interest.personnel-related costs.

Net cash used in investing activities decreased primarily due to reduced(a) decreased capital expendituresexpenditures, associatedresulting withprincipally from the completion of our newbuild construction program andin increasedthe earlier year, partially offset by (b) decreased proceeds from disposal of one ultra-deepwater floater and two harsh environment floaters in the year ended December 31, 2024.assets.

Overview—We expect to use existing unrestricted cash balances, cash flows from operating activities, borrowings under our Secured Credit Facility, proceeds from the disposal of assets or proceeds from the issuance of debt or shares to fulfill anticipated near-term obligations, which may include capital expenditures, working capital and other operational requirements, scheduled debt maturities and installments or other debt-related deposits or reservations of unrestricted cash. At December 31, 2024,2025, we had $560$620 million in unrestricted cash and cash equivalents and $381$377 million in restricted cash and cash equivalents. We have generated positive cash flows from operating activities over recent years and, although we cannot provide assurances, we expect that such cash flows will continue to be positive over the next year. For example, among other factors, if we incur costs for reactivation or contract preparation of multiple rigs or to otherwise assure the marketability of our fleet or general economic, financial, industry or business conditions deteriorate, our cash flows from operations may be reduced or negative.

We have a Secured Credit Facility that provides us with a borrowing capacity of $576 million through June 22, 2025 and $510 million through its maturity on June 22, 2028. Our Secured Credit Facility, which is secured by, among other things, a lien on eight of our ultra-deepwater floatersdrillships and two of our harsh environment floaters,semisubmersibles, contains certain restrictive covenants, including a minimum guarantee coverage ratio of 3.0 to 1.0, a minimum collateral coverage ratio of 2.1 to 1.0 and a minimum liquidity requirement of $200 million, among others. The Secured Credit Facility also restricts the ability of Transocean Ltd. and certain of our subsidiaries to, among other things, merge, consolidate or otherwise make changes to the corporate structure, incur liens, incur additional indebtedness, enter into transactions with affiliates and permits, subject to certain conditions, the abilityus to pay dividends and repurchase our shares. For more information about the restrictions in our Secured Credit Facility and maturity triggers thereof, as well as on our scheduledoutstanding debt maturities in 2025 and beyond,instruments, see Notes to Consolidated Financial Statements—Note 8—Debt.

Although we currently anticipate relying on these sources of liquidity, including cash flows from operating activities and borrowings under our Secured Credit Facility, among others, we may in the future consider establishing additional financing arrangements with banks or other capital providers and subject to market conditions and other factors, we may be required to provide collateral for any such future financing arrangements. Our secured indentures include collateral rig leverage ratios,ratios. and in the past, duringDuring periods whenwhere certain of thesecollateral rigs have experienced reduced levels of operating efficiency or utilization, we have in the past deposited unrestricted cash into the applicable debt service reserve account toand maintain compliance with the applicable covenant. We may in the future deposit a portion of our unrestricted cash or, in lieu thereof, taketaken other actions, including seeking covenant relief or otherobtaining consents of holders of certain of our secured debt, as applicable.applicable, in order to satisfy the applicable collateral rig leverage ratio, and we may in the future take such actions from time to time, as necessary. For more information about our indentures and our debt and equity securities, see Notes to Consolidated Financial Statements—Note 8—Debt and Notes to Consolidated Financial Statements—Note 13—Equity.

Debt and equity markets—From time to time, we seek to access the capital markets,markets includingin connection with respectour ongoing efforts to potentialprudently liabilitymanage managementour transactions.capital structure and improve our liquidity position. For example, we have completed multiple debt and equity transactions, including tender offers, redemptions, exchanges and retirement of existing debt, in connection with our ongoing efforts to prudently manage our capital structure and improve our liquidity position.debt. Subject to then-existing market conditions and our expected liquidity needs, among other factors, we may also use existing unrestricted cash balances, cash flows from operating activities, or proceeds from asset sales to pursuemanage liabilityour managementcapital transactions,structure, including among others,by purchasing or exchanging any of our debt or equity-linkedequity securities in the open market, in privately negotiated transactions, or through tender or exchange offers, or by redeeming any of our outstanding debt securities pursuant to the terms of the applicable governing document, if applicable. Any future purchases, exchanges or other transactions may be on the same terms or on terms that are more or less favorable to holders than the terms of any prior transaction. We can provide no assurance as to which, if any, of these alternatives, or combinations thereof, we may choose to pursue in the future, if at all, or as to the timing with respect to any future transactions. For more information about our debt and equity transactions during the three-year period ended December 31, 2024,2025, see Notes to Consolidated Financial Statements—Note 8—Debt.Debt and Notes to Consolidated Financial Statements—Note 13—Equity.

From time to time, we may also review the possible disposition of certain drilling assets. During the year ended December 31, 2024,2025, we completed the disposal of six ultra-deepwater floaters, together with related assets, in sales for recycling. As of December 31, 2025, we had classified as held for sale two ultra-deepwater drillships and one harsh environment semisubmersible, together with related assets, and we have committed to sell these drilling units for recycling. In January 2026, we completed the sale of one ultra-deepwater floaterdrillship, andtogether twowith harshrelated environmentassets, floaters.previously classified as held for sale. Considering market conditions, we have previously committed to plans to sell certain lower specification drilling units for scrap value, and we may identify additional lower-specification drilling units to be sold for scrap, recycling or alternative purposes. See Notes to Consolidated Financial Statements—Note 6—Long-Lived Assets.

Other commercial commitments—We have other commercial commitments, such as standby letters of credit and surety bonds that guarantee ourcertain performance as it relates to our drilling contracts, insurance, customs,activities, tax commitments and customs or other obligations in various jurisdictions. The cash obligations of these commitments, which are primarily geographically concentrated in Brazil, are not normally called because we typically comply with the underlying performance requirements. Standby letters of credit are issued under various committed and uncommitted credit lines, some of which require cash collateral. For additional information regarding our standby letters of credit and surety bond guarantees, see Notes to Consolidated Financial Statements—Note 12—Commitments and Contingencies.

Our tax returns are undergoing examinations in a number ofseveral taxing jurisdictions covering various years. We review our assets and liabilities on an ongoing basis and, to the extent audits or other events cause us to adjust theour liabilitiespreviously accruedrecognized inassets prioror periods,liabilities, we recognizerecord those adjustments in the period of the event. Our potential tax liabilities are dependent on numerous factors that cannot be reasonably projected, including among others, the amount and nature of additional taxes potentially asserted by local tax authorities; the willingness of local tax authorities to negotiate a fair settlement through an administrative process; the impartiality of the local courts; and the potential for changes in the taxes paid to one country that either produce, or fail to produce, offsetting tax changes in other countries. Consequently, we cannot reasonably estimate the future impact of changes to the assumptions and estimates related to our annual tax provision.

Unrecognized tax benefits—We establish liabilities for estimated tax exposures, and we recognize the provisions and benefits resulting from changes to those liabilities, together with related interest and penalties, in income tax expense or benefit. Income tax exposure items primarily include potential challenges to permanent establishment or active trading positions, intercompany pricing, disposition transactions, and withholding tax rates and their applicability. Such tax exposures may be affected by changes in applicable tax law or other factors, which could cause us to revise our prior estimates, and are generally resolved through the settlement of audits within the tax jurisdictions or by judicial means. At December 31, 20242025 and 2023,2024, we had unrecognized tax benefits of $414$302 million and $458$414 million, respectively, including interest and penalties, against which we recorded net operating loss deferred tax assets of $372$235 million and $411$372 million, respectively, resulting in net unrecognized tax benefits of $42$67 million and $47$42 million, respectively, including interest and penalties, that upon reversal would favorably impact our effective tax rate.

Long-lived asset impairment—We review our property and equipment for impairment when events or changes in circumstances indicate that the carrying amounts of our assets held and used may not be recoverable. Potential impairment indicators include rapid declines in commodity prices and related market conditions, declines in dayrates or utilization, cancellations of contracts or credit concerns of multiple customers. During periods of oversupply, we may idle or stack rigs for extended periods of time until market conditions change, or we may elect to sell certain rigs for scrap, which in combination with other indicators above, could be an indication that an asset group may be impaired since supply and demand are the key drivers of rig utilization and our ability to contract our rigs at economical rates. Our rigs are mobile units, equipped to operate in geographic regions throughout the world and, consequently, we may mobilize rigs from an oversupplied region to a more lucrativeprofitable and temporarily undersupplied region when it is economical to do so. Many of our contracts generally allow our customers to relocate our rigs from one geographic region to another, subject to certain conditions, and our customers utilize this capability to meet their worldwide drilling requirements. Accordingly, our rigs are considered to be interchangeable within each asset group, and we evaluate impairment by asset group. We consider our asset groups to be ultra-deepwater floaters and harsh environment floaters.

We assess recoverability of assets held and used by projecting undiscounted cash flows for the asset group being evaluated. When the carrying amount of the asset group is determined to be unrecoverable, we recognize an impairment loss, measured as the amount by which the carrying amount of the asset group exceeds its estimated fair value. To estimate the fair value of each asset group, we apply a variety of valuation methods, incorporating income, market and cost approaches. We may weigh the approaches, under certain circumstances, when relevant data is limited, when results are inconclusive or when results deviate significantly. Our estimate of fair value generally requires us to use significant unobservable inputs, representative of Level 3 fair value measurements, including assumptions related to the long-term future performance of our asset groups, such as projected revenues and costs, dayrates, rig utilization and revenue efficiency. These projections involve uncertainties that rely on assumptions about demand for our services, future market conditions and technological developments. Because our business is cyclical, the results of our impairment testing are expected to vary significantly depending on the timing of the assessment relative to the business cycle. Altering either the timing of or the assumptions used to estimate fair value and development of significant unanticipated changes to the assumptions could materially alter an outcome that could otherwise result in an impairment loss. Given the nature of these evaluations and their application to specific asset groups and specific time periods, it is not possible to reasonably quantify the impact of changes in these assumptions. See Notes to Consolidated Financial Statements—Note 6—Long-Lived Assets.

◾debt, including interest rates, credit ratings and our evaluation or decisions with respect to any potential liability management transactions or strategic alternatives intended to prudently manage our liquidity, debt maturities and other aspects of our capital structure and any litigation, potential or alleged defaults and discussions with creditors related thereto;

Transocean Ltd. (together with its subsidiaries and predecessors, unless the context requires otherwise, “Transocean,” “we,” “us” or “our”) is a leading international provider of offshore contract drilling services for oil and gas wells. As of AprilJuly 28, 2026, we owned or had partial ownership interests in and operated 27 mobile offshore drilling units, consisting of 20 ultra-deepwater drillships and seven harsh environment semisubmersibles.

Disposal of assets—In the threesix months ended MarchJune 31,30, 2026, we completed the sale of the ultra-deepwater floatersdrillships Deepwater Champion and Discoverer India, together with related assets, for aggregate net cash proceeds of $27 million, including $3 million received as a deposit in the year ended December 31, 2025. In July 2026, we completed the sale of the harsh environment semisubmersible Henry Goodrich, together with related assets, for net cash proceeds of $3 million. See “—Liquidity and Capital Resources.”

Exercised warrants—In April 2026, we issued 9.7 million Transocean Ltd. shares as net settlement of 22.2 million warrants exercised by holders to purchase Transocean Ltd.our shares. See “—Liquidity and Capital Resources.”

InDrilling market—Our industry outlook remains positive, supported by numerous long-term forecasts indicating that hydrocarbons will continue to be the contextdominant source of energy for the naturalforeseeable depletionfuture. Indeed, many operators are increasingly redirecting capital investment to the exploration and production of existing fields, maintaining current oil and naturalgas, gasand productionaway levelsfrom willnon-core requireactivities. bothWhile thewe developmentexpect our customers to continue to be disciplined in their deployment of existing resourcescapital, and continued investment in exploration to identify new reserve opportunities. Wewe believe that oil and natural gas producersthey will continue to invest aan greaterincreasing portion of their budgets in offshore drilling, and particularly in deepwater, where resource potential, production longevity, and project economics are favorable, to achieve their production and reserve replacement targets.

Although hydrocarbon prices remain sensitive to geopolitical events, macroeconomic conditions and policy decisions, and short-term supply fluctuations, we expect the overall economics of deepwater and harsh-environment projects to remain attractive. Deepwater and harsh-environmentThese fields continue to generate competitive economic returns and are generally of generally lower carbon intensity compared to many other hydrocarbon sources, making them consistently compelling for capital deployment.sources.

WeSimilarly, we expect demand for harsh-environmentharsh environment rigs to remain strong through the end of the decade, driven primarily by activity in Norway – the largest market for suchthese units – and by opportunities emerging opportunities in new geographies suited for harsh-environment capable rigs. Several high-specification semisubmersible rigs that previously mobilized to other harsh-environmentharsh environment regions, such as Namibia, the Black Sea, and Australia, mayhave ultimatelyor are expected to return to the Norwegian North Sea depending onas project requirements and market conditions.conditions continue to improve.

Fleet status—We refer to the availability of our rigs in terms of the uncommitted fleet rate. The uncommitted fleet rate is defined as the number of uncommitted days divided by the total number of rig calendar days in the measurement period, expressed as a percentage. An uncommitted day is defined as a calendar day during which a rig is idle or stacked, is not contracted to a customer and is not committed to a shipyard. The uncommitted fleet rates exclude the effect of priced options. As of MayAugust 4,5, 2026, the uncommitted fleet rates for the remainder of 2026 and each of the four years in the period ending December 31, 2030 were as follows:

Three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025

Contract drilling revenues—Contract drilling revenues increaseddecreased for the three months ended MarchJune 31,30, 2026, compared to the three months ended MarchJune 31,30, 2025, primarily due to approximately $50 million resulting from decreased rig utilization for the comparable fleet, considering six idle rigs in the earlier-year utilization rate that were classified as held for sale and sold subsequent to June 30, 2025. This decrease was partially offset by the following increases: (a) approximately $80 million resulting from increased utilization, (b) approximately $65$15 million resulting from higher average daily revenues, (cb) approximately $15$10 million resulting from increased reimbursement revenues, and (dc) approximately $15$5 million resulting from increasedimproved revenue efficiency for the active fleet.

Costs and expenses—Operating and maintenance costs and expenses decreasedincreased for the three months ended MarchJune 31,30, 2026, compared to the three months ended MarchJune 31,30, 2025, primarily due to the following increases: (a) aapproximately non-cash loss of $34$15 million in the earlier year resulting from anpersonnel unfavorablecosts legal outcome,and (b) approximately $10 million resulting from reimbursable costs. These increases were partially offset by the following decreases: (a) approximately $5 million resulting from rigs sold, and (cb) approximately $5 million resulting from lower in-service costs related to additional services.services Theseand decreasescontract werepreparation partiallycost offsetrecognition, by the following increases: (a) approximately $15 million resulting from reimbursable costs, (b) approximately $10 million resulting from increased personnel costs,and (c) approximately $5 million resulting from increasedlower utilization,asset and (d) approximately $5 million resulting from severancemaintenance costs.

Depreciation and amortization expense decreased for the three months ended MarchJune 31,30, 2026, compared to the three months ended MarchJune 31,30, 2025, primarily due to $34a $30 million reduction resulting from rigs sold or classified as held for sale.

Other incomeGeneral and expense—Interestadministrative expensecosts and expenses increased infor the three months ended MarchJune 31,30, 2026, compared to the three months ended MarchJune 31,30, 2025, primarily due to the following: (a) $189$11 million increased interest resulting from changes to the fair value of theacquisition bifurcated compound exchange feature embedded in the indenture governing the 4.625% senior guaranteed exchangeable bonds due September 2029costs and (b) $10$3 million increasedof interestintegration resultingcosts, fromboth debtof issuedwhich recognized in the current-year period with no comparable activity in the earlier year, partially offset by (c) $34$7 million decreased interest resulting from debtdecreased repaidpersonnel as scheduled or early retired.costs.

Disposal of assets—In the three months ended MarchJune 31,30, 2026,2026 and 2025, we recognized a net loss and a net gain, respectively, on retirementdisposal of debtassets associatedunrelated withto therig retirement of the 8.375% Senior Secured Notes.sales.

Income tax expense or benefit—In the three months ended MarchJune 31,30, 2026 and 2025, our effective tax rate was (335.3)%7.8% percent and (95.8)14.2 percent, respectively, based on income or loss before income taxes. In the three months ended MarchJune 31,30, 2026 and 2025, the effect of various discrete period tax items was a net tax benefit of $113$24 million and a net tax expense of $14$203 million, respectively. In the three months ended MarchJune 31,30, 2026, such discrete items includedwere changesprimarily related to operating structures, various uncertain tax positions and valuation allowances.allowance adjustments. In the three months ended MarchJune 31,30, 2025, such discrete items included changes to various uncertain tax positionspositions, valuation allowances and valuationrig allowances.basis changes related to impairment. In the three months ended MarchJune 31,30, 2026 and 2025, our effective tax rate, excluding discrete items, was 192.019.4 percent and (62.3)70.0 percent, respectively, based on income or loss before income taxes.

In the threesix months ended MarchJune 31,30, 2026, our primary source of cash was net cash provided by operating activities. Our primary uses of cash were debt repayments and capital expenditures.

Net cash providedused byin investing activities increaseddecreased primarily due to (a) decreased capital expenditures, (b) increased proceeds from disposal of assets, primarily resulting from the completion of the sale of two ultra-deepwater floaters in the current-year period, and (c) proceeds from disposal of an investment in a note receivable from an unconsolidated affiliate.affiliate in the current-year period relative to proceeds from disposal of an investment in equity of an unconsolidated affiliate in the earlier year.

Overview—We expect to use existing unrestricted cash balances, cash flows from operating activities, borrowings under our Secured Credit Facility, proceeds from the disposal of assets or proceeds from the issuance of debt or shares to fulfill anticipated near-term obligations, which may include capital expenditures, working capital and other operational requirements, scheduled debt installments and maturities or other debt-related deposits or reservations of unrestricted cash. At MarchJune 31,30, 2026, we had $330$509 million in unrestricted cash and cash equivalents and $285$286 million in restricted cash and cash equivalents. We have generated positive cash flows from operating activities over recent years and, although we cannot provide assurances, we expect that such cash flows will continue to be positive over the next year. For example, among other factors, if we incur costs for reactivation or contract preparation of multiple rigs or to otherwise assure the marketability of our fleet or general economic, financial, industry or business conditions deteriorate, our cash flows from operations may be reduced or negative.

Drilling fleet—From time to time, we review possible acquisitions of businesses and drilling rigs, as well as noncontrolling ownership interests in other companies, and we may make significant future capital commitments for such purposes. We may also consider investments related to major rig upgrades, new rig construction, or the acquisition of a rig under construction. Any such acquisition or investment has involved, and in the future could involve, the payment by us of a substantial amount of cash or the issuance of a substantial number of additional shares or other securities. Our failure to subsequently secure drilling contracts in these instances, if not already secured, could have an adverse effect on our results of operations or cash flows. For information about our Agreement to acquire Valaris, see Notes to Consolidated Financial Statements—Note 1—Business.

From time to time, we may review the possible disposition of certain drilling assets. In the threesix months ended MarchJune 31,30, 2026, we completed the disposal of two ultra-deepwater drillships, together with related assets, in sales for recycling. Additionally,In as of March 31,July 2026, we havecompleted classified as held forthe sale of one harsh environment semisubmersible and related assets,assets andin wea have committed to sell this drilling unitsale for recycling. Considering market conditions, we may identify additional lower-specification drilling units to be sold for scrap, recycling or alternative purposes. See Notes to Condensed Consolidated Financial Statements—Note 5—Long-Lived Assets.

Contractual obligations and other commercial commitments—As of MarchJune 31,30, 2026, with exception to our redemption and early retirement of the outstanding $358 million aggregate principal amount of the 8.375% Senior Secured Notes, there have been no material changes to our contractual obligations or other commercial commitments as previously disclosed in “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our annual report on Form 10-K for the year ended December 31, 2025. For additional information about our debt obligationsobligations, including scheduled maturities and scheduledearly maturities,retirement, see Notes to Condensed Consolidated Financial Statements—Note 6—Debt.

As of MarchJune 31,30, 2026, there have been no material changes to the critical accounting policies and estimates that we use as a basis for applying judgments, assumptions and estimates to prepare our condensed consolidated financial statements, as previously disclosed in “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” in our annual report on Form 10-K for the year ended December 31, 2025.

We conduct operations through our various subsidiaries in countries throughout the world. Each country has its own tax regimes with varying nominal rates, deductions and tax attributes that are subject to changes resulting from new legislation, interpretation or guidance. From time to time, as a result of these changes, we may revise previously evaluated tax positions, which could cause us to adjust our recorded tax assets and liabilities. Tax authorities in certain jurisdictions are examining our tax returns and, in some cases, have issued assessments. We intend to defend our tax positions vigorously. Although we can provide no assurance as to the outcome of the aforementioned changes, examinations or assessments, we do not expect the ultimate liability to have a material adverse effect on our financial position or results of operations; however, it could have a material adverse effect on our cash flows. See Notes to Condensed Consolidated Financial Statements—Note 7—Income Taxes.